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Discussion about impact on Indian economy by Automobiles & Engineering Goods.(International trade perspective)Presented by: Kritika Arora Prakash G Prateek Kr. SawhneyA PART OF: GROWTH PROSPECTS OF THURST AREAS OF INDIAN EXPORTS

INTRODUCTIONThe first commercial automobile ran on Indias road was in 1897, which was imported directly from Germany. By 1940, Indian automobile sector got a start up by Embryonic Automotive industry. By1950 manufacturing of parts for automobiles started. The entry of foreign automobile industries after 1970s gave the complete shape for Indian automobile industry and a start up for its growth. The liberalization policy and weakening of license raj by the year 1991, allowed the automobile industries to promote their operations in a large scale.Source:Engineering Export Promotion Council http://www.eepc.com

INDIAS AUTOMOBILE SECTORAfter 1991, the liberalization policy for foreign trade has opened the door for foreign Automobile industries. Initial entry was majorly by Imports and JVs with Indian Auto tycoons Bajaj, Maruti, Tata, TVS, Ashok Leyland, etc., By 1995, several automobile industries were set in India, where parts were imported and assembled for sales in Indian subcontinent . Today around 70 major automobile manufacturers have their ventures in India either on its own or JV or strategic alliance with Indian companies or foreign companies. More than 1043 major players are there contributing to Indian automobile industry growth ad development.Source:Engineering Export Promotion Council http://www.eepc.com

FIGURES..The automotive industry (including components & tyres) has already attained a turnover of US $105888 billion. The industry provides direct and indirect employment to 13.1 million people. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 4.14% in 2008-09. The industry is also making a contribution of 17% to the kitty of indirect taxes of the Government. In 2010 (April-August), overall automobile exports registered a growth rate of 48.42 percent with industry producing 7,063,063 vehicles.http://commerce.nic.in/

EXPORTS AND IMPORTSAfter 1998, Indian automobile industry developed into a major sector, assembling almost every car that was sold in Indian subcontinent. Imports were reduced by 15 times and exports were promoted, compared to the number of automotives traded previously. More than 44 varieties of automobile are manufactured which constitutes the 59 different automobile sales such as Motor cycles, Cars, SUVs, Lorry, Bus etc., Around 84 major ancillaries for the automobile industry is being imported for assembling and sales purpose in India. 6% of Indian automobiles on road today are imported directly from countries like Japan, Germany, Korea and US.http://commerce.nic.in

PRODUCTION HUBSA major chunk of India's automobile manufacturing industry is based in and around the city of Chennai ("Detroit of India), accounting for 60 per cent of the country's automotive exports. Gurgaon and Manesar are hubs where most of the cars in India are manufactured or assembled. The Chakan corridor near Pune, Maharashtra is another vehicular production hub. Halol in Gujarat, Aurangabad in Maharashtra, Kolkatta in West Bengal are some of the other automotive manufacturing regions around the countrySource:Source:Engineering Export Promotion Council http://www.eepc.com

TREND IN THREE YEARSExports from India touched 3,31,539 units in FY09 as against 2,11,112 units in the previous financial year. Overseas presence with exports from India by registering a growth of 57.04% in the last fiscal. Overall vehicle exports from India grew by 23.60% at 15,30,660 units in the last financial year, while the same stood at 11,38,333 units in the FY09. Exports growth in the financial year 2009 was robust also in the two-wheeler category, which registered 22.50 per cent rise at 10,04,174 units as against 7,69,713 units in the year 2007-08.Source: http://www.fundoodata.com/industry-companies/Automobile/AutoAncillaries/Automobiles/224.html

CLASSIFICATION OF COMMODITIES

Source: Society of Indian Automobile Manufacturers http://www.siamindia.com/scripts/domestic-sales-trend.aspx

INDIAN AUTOMOBILE EXPORT SUMMARY2009-2010MOTR CARS & OTHR MOTR VHCLS FR TRNSPRT OF PERSONS(EXCL OF 8702)INCL RCNG CARS ETC PARTS AND ACCESSORIES OF THE MOTOR VEHICLES OF HEADINGS NOS 8701 TO 8705 MOTORCYCLES(INCL MOPEDS)& CYCLS FTD WTH AUXLRY MOTOR,W/N WTH SIDE-CARS;SIDE-CARS TRACTORS(EXCL TRACTORS OF HDG NO.8709) Others

13% 5%

Commodity wise10% 51%

21%

http://commerce.nic.in

INDIAN AUTOMOBILE EXPORT SUMMARY2009-2010UK USA ITALY GERMANY Others

Country wise

9% 7%

9%

U K , 560.41 USA , 435.91

5%

70%

ITALY , 525.72 GERMANY , 334.72 Others, 4312.51

* Fig in Bln INRhttp://commerce.nic.in

INDIAN AUTOMOBILE EXPORT SUMMARY2009-2010WHEEL CHAIRS FR INVALID MCHNCLY PRPLD 18% OTHR INVALID CARRIAGES MCHNCLY PRPLD

82%

Increased export commoditieshttp://commerce.nic.in

INDIAN AUTOMOBILE EXPORT SUMMARY2009-20100% 5% 7% OTHR VHCLS(>13 PERSONS) WTH CMPRSNIGNTN INTRNL CMBSTN PISTON ENGINE OTHR VHCLS(13 PERSONS) CHASSIS FR MOTOR VHCLS HDNG 8705 CHASSIS FR VHCLS HDNG 8703 EXCP 3WHLD OTHERS 86% Decreased Import commoditieshttp://commerce.nic.in

DOMESTIC INDUSTRY SCENARIO` `

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The cumulative growth of the Passenger Vehicles segment during April 2009 March 2010 was 12.17%. Passenger Cars grew by 11.79%, Utility Vehicles by 10.57% and Multi Purpose Vehicles by 21.39% for the year 200910. The Commercial Vehicles segment grew marginally at 4.07%. While Medium & Heavy Commercial Vehicles declined by1.66%, Light Commercial Vehicles recorded a growth of 12.29%. Three Wheelers sales fell by 9.71%. Two Wheelers registered a negative growth rate of 7.92% during 2009-10.Source: Society of Indian Automobile Manufacturers http://www.siamindia.com/scripts/domestic-sales-trend.aspx

AUTOMOBILE DOMESTIC SALES TRENDSCategories 200304 Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total6,810,537 7,897,629 8,906,428 10,123,988 9,654,435 9,724,243 12,292,770

200405

200506

200607

* Number of Vehicles 200720082009-10 08 09

902,096

1,061,572

1,143,076

1,379,979

1,549,882

1,552,703

1,949,776

260,114

318,430

351,041

467,765

490,494

384,194

531,395

284,078

307,862

359,920

403,910

364,781

349,727

440,368

5,364,249

6,209,765

7,052,391

7,872,334

7,249,278

7,437,619

9,371,231

Source:Society of Indian Automobile Manufacturers http://www.siamindia.com/scripts/domestic-sales-trend.aspx

Domestic Market Share for 2009-2010

Source:Society of Indian Automobile Manufacturer http://www.siamindia.com/scripts/market-share.aspx

Foreign Trade PoliciesCredit of embedded tax ` SIAM had got a study done through ICRA Advisory Services to estimate the cascading impact of embedded tax in manufacturing vehicles in India for which no set-off is available under any scheme. ` ICRA looked at two states, Maharashtra and Tamil Nadu, which have automotive hubs and had estimated in July 2009 that the quantum of embedded tax amounts to around 12% of manufacturing cost. ` Since this makes our vehicles less competitive by 12% in the international markets, SIAM suggests that any export incentive scheme offered to the exporters should factor this in the total value of credit. This should be in addition to the Drawback/DEPB for actual import duty suffered on raw material and component. ` DEPB Scheme should be extended for at least two years till the internal reforms are done.Source: http://www.iitrade.ac.in/kmarticle.asp?id=187 http://www.siamindia.com/scripts/eximpolicy.aspx

Foreign Trade PoliciesDrawback for 2% education CESS should be admissible for claim ` Presently the import duty structure is as under a) Basic Custom Duty b) CVD in lieu of Excise Duty + 2% CESS on CVD c) 2% CESS on total Duty (a+b)`

CVD and 2% CESS on all imported items are refunded as CENVAT credit. When the imported input is used for export production, basic duty is refunded as drawback. However, 2% CESS on total Duty remains nonCENVATable / refundable. Since all duties on inputs stage are neutralised by way of drawback and or under licence route, the 2% CESS on total duty should also be refunded as drawback.

Source: http://www.iitrade.ac.in/kmarticle.asp?id=187 http://www.siamindia.com/scripts/eximpolicy.aspx

Foreign Trade PoliciesInterest on duty foregone under duty exemption schemes ` The Exim Policy provides import of Capital Goods, raw materials, components, consumables etc. either under concessional duty rate or at zero duty for carrying out manufacturing activities with time bound export obligations.`

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Due to some unavoidable changed circumstances, if the importer is not able to fulfill the obligation, then importer needs to regularise the imports on payment of duty + interest @ 15% p.a. Under the prevailing market conditions, the ruling interest rate is in the range of 6% to 8% p.a for all types of transactions.To reduce the burden and to bring down the transaction cost, the interest rate for regularisation of imports need to be plugged max. @ 10% p.a. Exporters who undertake the business risks can survive during uncertainties.

Source: http://www.iitrade.ac.in/kmarticle.asp?id=187 http://www.siamindia.com/scripts/eximpolicy.aspx

Special Focus Initiative` `

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Expeditious clearance of approvals required from DGFT shall be ens